Combine all ingredients in a non-reactive heavy saucepan, allow to steep for 40 minutes, stirring occasionally. Bring mixture to a low and gentle boil while stirring continuously. Remove saucepan from heat and allow to cool thoroughly. Strain through a very fine sieve and pour the strained oil into a bottle and cap tightly. This oil will remain up to 6 months if it is refrigerated and capped tightly. This is a Medium Hot condiment.

This oil is used both to color and to flavor dishes. Use it in place of vegetable oil for South American recipes. Use only annatto (achiote) seeds that are bright-reddish in color; seeds that are brownish are old and have probably lost much of their flavor.